EY restructuring partner quits for Alix as Big Four exodus continues

Another top insolvency partner has quit EY to join AlixPartners, an independent rival, as the Big Four struggle to retain talent because of conflicts of interest with their audit practices.

Joe O'Connor is the third senior EY restructuring partner to jump ship this year as the war for talent intensifies ahead of an expected wave of work for advisers as distressed companies battle the effect of the pandemic on their finances.

Partners at the Big Four - EY, Deloitte, KPMG and PwC - are increasingly prevented from taking on work due to the potential for conflicts of interest with the firms’ audit practices.

The firms are being forced to ringfence their audit practices after failing to raise red flags over accounting scandals at a string of audit clients.

EY was unable to act on major financial restructurings at the likes of Debenhams and Thomas Cook because of its audit work at the companies.

Deloitte and KPMG have both been seeking buyers for their UK restructuring divisions in an effort to address the issue of conflicts and raise money after suffering a financial crunch due to the pandemic.

A spokesman for Alix confirmed Mr O’Connor, who advised on the restructuring of bed retailer Dreams, will join the firm.

He left EY earlier this year at around the same time as senior partners Lee Watson and Jessica Clayton, whose departures to Alix were announced in February.

It is the latest in a string of high profile moves by Big Four partners to independent rivals that reward their top performers with higher pay and do not have audit practices that prevent them winning lucrative consulting work.

At least four PwC partners have quit to join FTI Consulting, another independent firm, in the past 18 months prompting PwC to seek a court injunction last year.

KPMG lost some of its leading insolvency consultants to Alvarez and Marsal, the administrator of scandal-hit FTSE 100 company NMC Health, after a failed takeover bid in 2016.

Senior insiders said that the trend of independent firms poaching top partners from the Big Four could scupper attempts by Deloitte and KPMG to offload their UK restructuring units. Cherry-picking the top partners would avoid the need to buy the less profitable parts of the businesses, they said.

Deloitte has already reportedly abandoned its efforts to sell its restructuring division after an intervention by its global bosses.

An EY spokesman said: “EY continues to invest in its UK turnaround and restructuring practice and the team has grown over 40pc in the last three years to around 300 people.

“Earlier this month, EY announced seven senior promotions in the team, including two Partners and five Associate Partners, bringing significant experience in distressed corporate advisory, debt restructuring, solvent restructuring, pensions strategy and insolvency.”

Mr O’Connor has been contacted for comment.